CENTURY TEXTILES & INDUSTRIES LIMITED
Know the Company
Century Textiles & Industries Ltd (CTIL), incorporated in 1897 at Mumbai by Mr. BK Birla, was the flagship company of the BK Birla group. Presently, CTIL is part of the Aditya Birla Group with a controlling 50.21% stake in the company and Mr. Kumar Mangalam Birla has been appointed as Chairman of the company in July 2019, following the demise of Mr. BK Birla. Aditya Birla Group is an Indian multinational Fortune 500 company headquartered in Mumbai, Maharashtra. The Group has presence in more than 36 countries across the globe, having revenue of over $65 billion and over 50% of its revenue comes from global operations.
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CTIL functioned as a cotton textile mill until 1951. Since then, it has diversified into Rayon, Cement, Pulp and Paper industries. In 2016, CTIL demerged its cement business along with a debt of Rs 3,000 crore and merged it with the Group’s cement unit, Ultratech Cements Ltd. Following the demerger of cement business, in 2018, CTIL ventured into residential and commercial real estate business with the incorporation of a wholly owned subsidiary named Birla Estates Private Ltd (BEPL). Presently, CTIL has three distinct business units: Pulp & Paper, Textiles and Real Estate.
Business Divisions
Pulp and Paper
CTIL’s Pulp and Paper manufacturing facilities are in Lalkua, Uttarakhand and they span across 396 acres of land with a production capacity of 4.81 lakhs MT per annum. In addition to this, the company has board and tissue cutting facilities and service centers in Baddi, Sonipat, Bharuch, Hyderabad, and Lalkua. The company’s product portfolio includes writing & printing paper, paper for MICR cheques, overlay tissue, maplitho and copier, as well as virgin fiber grade soft tissue including facial napkin, toilet, and carrier tissues. Besides this, CTIL is one of the leading manufacturers of multilayer packaging board, supplying folding box board, solid bleached sulfate, cup stock grades. It also produces Century Green Pulp, a unique and eco-friendly variant that finds applications in tableware items. The tableware produced from this green pulp meets the strict regulations set by the Food and Drug Administration (FDA) as well as guidelines prescribed by the Food Safety and Standards Authority of India (FSSAI) for food packaging products.
Operating since 1984, the company’s pulp and paper division is the largest manufacturer of paper, board, tissue, and pulp from a single location in India. The manufacturing capacity for pulp and paper stood 4,81,130 Ton per annum with a capacity utilization of 95%. For the FY 2023, 75% of the company’s consolidated revenue comes from pulp and paper division.
Textiles
CTIL’s textile business offers a wide range of luxury textiles, including bottom weights, suits, finer fabrics, and domestic linen. Its textile manufacturing unit, situated in Bharuch, Gujarat, spans across 100 acres. Manufacturing capacity of the company’s textiles unit is 41 million meters per annum. To ensure the quality and compliance of its textiles with international standards, the company also has set up a mechanical and chemical laboratory.
During the FY 2017-18, the company had entered into an agreement with Grasim Industries Limited, allowing it the right to manage and operate CTIL’s Viscose Filament Yarn business, which is part of the textile segment, for a duration of 15 years commencing from 2018. As a part of consideration, Grasim has paid an upfront royalty of Rs 605 crores and also paid an interest free security deposit of Rs 200 crores which is repayable after 15 years. For the FY 2023, almost 21% of the company’s consolidated revenue came from the textile division.
Real Estate
With the objective to undertake real estate development projects, CTIL incorporated a 100% subsidiary named Birla Estate Private Ltd (BEPL) in 2017. Century Textile’s Real Estate division has presently five residential projects with an area under development of over 67 lakhs square feet and two commercial projects having area under development of about 12.7 lakhs square feet.
Present Projects
Birla Estate owns two commercial properties in Mumbai, namely Birla Aurora and Birla Centurion.
The company has currently five residential projects which includes:
-Birla Vanya Kalyan, Maharashtra 13.3 lakhs Sq. Ft Area under development.
-Birla Niyaara Worli, Mumbai 24 lakhs Sq. ft Area under development.
-Birla Navya Golf Course Extension, Gurugram, NCR 17.8 lakhs Sq. Ft Area under development.
-Birla Alokya Whitefield, Bengaluru 5.5 lakhs Sq. Ft Area under development.
-Birla Tisya Rajajinagar, Bengaluru 6.5 lakhs Sq. Ft Area under development.
For FY 2023, about 3% of the company’s consolidated revenue comes from Real Estate division.
Operational Performance
The pulp and paper business reported a marginal increase in sales volume and single digit growth in revenue during the Q2FY24. At the same period, overall capacity utilization was 89%, with increase in sales volume by 8% as compared to the last quarter and declined by 1% YoY to 107,608 metric tons. The company’s operations were adversely affected due to heavy flood in Gujarat and Himachal Pradesh. In Q2 FY24, the net sales declined by 15% on YoY to Rs 799 crores, while EBITDA stood by Rs 76 crores with net margin at 9.5%.
In Q2FY24, the Real Estate business has displayed an exceptional customer response across all categories. Industry witnessed a fall in the inventory across cities with a smaller number of new launches ahead of the upcoming festive season. Birla Estate’s already launched project achieved booking worth Rs 708 crores in Q2 FY24. The company’s collection also continued to be strong at Rs 251 crores from all projects during the Q2 FY24.
The company launched the first phase of Birla Trimaya, Bengaluru, which got an outstanding response from customers. It achieved bookings worth of Rs 467 crores, selling almost the entire phase within 36 hours. The delivery of Birla Alokya, Bengaluru has commenced from October 2023 and other two projects, Birla Vanya Kalyan, Birla Vanya Phase 1 Gurugram, are on track for delivery in the current financial year itself. On commercial assets, Birla Aurora and Birla Centurion continue to generate stable rentals.
Textile export demand from Europe and the US are increasing very slowly, but the expected situation of oversupply will continue till the end of this financial year, as demand growth is lower than the additional capacity expansion by domestic mills. In Q2 FY24, sales income from the Textile division increased by 8% QoQ and 5% YoY.
Financial Performance
For the Q2FY24, consolidated revenue of the company stood at Rs 1,087 crores, compared to Rs 1,242 crore y-o-y, registering a fall of 10.24%. On a QoQ basis, total income was down almost 1%. The EBITDA for the second quarter of the current financial year was Rs 46 crores with a net loss of Rs 33 crores. However, in the corresponding quarter of the previous year, net profit was at Rs 70 crore. For the first half of the FY 2024, the consolidated turnover stood at Rs 2,193 crores and EBITDA reported at Rs 181 crores, with a net loss of Rs 40 crores.
Debt level of the company was Rs 1,000 crores in the beginning of the FY, but then the company made few property acquisitions during the year. For these acquisitions and some capex for Paper business, the company raised almost Rs 900 crores in debt, but have not yet utilized the entire loan.
As of September 2023, the gross debt of the company stood at around Rs 2,200 crores. At the same time, it has about Rs 400 crores in mutual funds and bank balances, and so, roughly, the net debt is around Rs 1800 crores.
Strengths
Century Textiles’ almost all of the Real Estate projects have received exceptional customer response as the company is part of the renowned Aditya Birla Group. Moreover, the company plans to develop high-quality residential and commercial properties which distinguish itself from competitors by prioritizing efficiency in design, customer-centric approach, and sustainability. CTIL is aggressively developing several projects through strategic planning by identifying prominent markets across various cities in India.
The company has a track record of prestigious projects which were sold in record times. It sold 400 units in Birla Vanya in 3 days of launch, sold out the complete first phase of Birla Navya within a year of launch; it also sold more than 80% of the inventory at Birla Tisya in a little more than a year since the launch as well as sold more than Rs 2,300 Crores worth of inventory in Birla Niyaara in about a year from launch, making it the highest selling project in Mumbai Metropolitan Region in 2022. The second and third phase of Birla Navya, Gurugram project achieved booking value of more than Rs 250 Crores and Rs 200 Crores respectively in weeks after launch.
Major monetary benefit about the existing projects of the company is the overwhelming customer response for its projects and interestingly some of them are self-paying for themselves. So, in fact, the money that it requires is only for growth capital. So far, cash flows are pretty good enough, and so, the company does not expect any major issues in funding ongoing projects. Thus, the company expects the debt to stay at the same level of Rs 2,200 crores.
The company’s focuses on luxury residential segment and growing interest of buyers in premium housing. Its luxury project, Birla Niyaara is selling for around Rs 80,000 to Rs 85,000 per square ft on carpet area. It had become the highest selling project in a year in the Mumbai Metropolitan Region with a booking value of Rs 1,915 crore in previous FY. Tendency of companies from the part of large business groups as well as listed players are likely to continue dominating sales in the future as homebuyers are willing to pay a premium to avoid execution risk, also help the company to perform outstandingly.
Still, Paper business is a cash cow for the company, contributing almost three-fourth of its revenue. Started in 1984, the Pulp and Paper division holds the position of being the largest manufacturer of paper, board, tissue, and pulp from a single location in India. Its presence extends beyond domestic markets, as it has a significant role in the global export market.
New Launches
Century Textiles has added Rs 16,000 crores of projects this year, so far. It did three projects and added three new projects in Q1, two new projects in Q2. CTIL has set an ambitious target to reach gross pre-booking value of about Rs 3,000 crores. The company is expecting to launch a new project in R. R. Nagar, Bangalore, which it acquired last year. It is also planning to launch Walkeshwar in Q4 FY24 and a new phase of Birla Niyaara, Worli in the third quarter. The company is confident that all of these three new projects together with its current sustenance sales should help it to achieve the target of around Rs 3,000 crores. Birla Niyaara project already has collected approximately Rs.750 crores, so far.
During the quarter ended September 2023, CTIL has acquired two notable properties at premium locations with a combined estimated gross developable value of approximately Rs 10,300 crores. This includes a binding MoU for the purchase of approximately 30 acres of land in Thane, which has a potential of more than Rs 7,600 crores, and it acquired approximately 6.8 acres of land in Mathura Road, New Delhi, which has a potential of more than Rs 2,700 crores.
The company also has a very strong pipeline of about Rs 45,000 crores of gross development value, presently. It also looking at adding another about Rs 10,000 crores this year, probably another Rs 20,000 crores by the next year.
Awards and Recognitions
Birla Navya, project in Gurugram was awarded as The Best Residential Project of the Year at the 14th Realty + Conclave & Excellence Awards (North), 2022. It was recognized among ET’s Best Brands 2022 at the Economic Times Best Brands Conclave 2021-22 and Apex India Occupational Health & Safety Award 2022 – ‘Gold Award’ for Birla Navya in construction sector.
Textiles Division got GOLD 2022 National Award for Manufacturing Competitiveness (NAMC) from the International Research Institute for Manufacturing, India (IRIM). It also received SEEM National Energy Management Award-Gold from Society of Energy Engineers & Managers.
Century Pulp & Paper Division has received first and second prize in the 112th and 113th respectively at the “All India Farmers’ Fair and Agro-Industrial Exhibition” 2022, organized by and held at the G B Pant University of Agriculture & Technology, Pantnagar, Uttarakhand. It was also recognized as a Top Performer designated consumer in Pulp & Paper sector of PAT Cycle II under National Mission for Enhanced Energy Efficiency, on the occasion of 21st BEE Foundation Day.
Chances of Value Unlocking
The company management, in its recent communication, mentioned that it will wait until the real estate business is able to finance its growth through its own capital. When Real Estate becomes completely self-sufficient, it is probably the time the company will unlock the value of the Real Estate business. So, we can expect demerger of the real estate division and the textiles division in an appropriate time in the future.
Industry outlook
India is one of the fastest growing large economies in the world and will remain so for the near future supported by large pool of working population, fast growth of urbanization, ongoing and planned infrastructure projects and the government’s ambitious target for achieving third largest economy by 2030. Outlook of the Real Estate industry remains firm on rise in per capita income, chances of reduction in mortgage rates, rapid urbanization and focus on affordable housing projects. Going forward, CTIL will be one of the leaders in this fast-growing sector dedicated to deliver projects towards ever-changing customer preferences.
CTIL’s major revenue is derived from Paper & pulp and Textiles division at present whereas real-estate segment contributes a small portion. Going forward, real estate business will be the growth engine of the company as it will invest aggressively in this sector.
The company management is expecting roughly around Rs 2,000 crores from real-estate sales for the current financial year, but they are cautious as it depends upon people paying their balance dues and concluding the sale completely to take possession because the company must book the revenue only when the customer pays. CTIL is planning three projects in three different regions with roughly in the range of about 1,500 units, cumulatively. It is also looking at aggressive launches, about another Rs 25,000 crores, Rs 30,000 crores of projects every year, for the next couple of years. Thus, outlook for the industry as well as the company looks promising.
Coming to the paper and pulp division, demand is expected to increase slowly; however, margin remains steady as mills have already announced price increases due to extreme cost pressure. Export demand from Europe and US is increasing slowly. However, the situation of oversupply will continue till the end of this financial year, as demand growth is lower than the additional capacity expansion by domestic mills.
Risk
Real estate is a highly sensitive sector to changes in the interest rates as major part of the purchases meets through borrowings. Interest rates are expected to remain steady for some times, however, a prolonged period of high interest rate regime or any further rate increase may adversely affect the demand.
Mumbai Metropolitan Region and Pune absorbs almost one-fourth of the total office space. If the global economy slips into a slowdown, the Indian IT-ITeS industry may also face challenges, at least for a short term, which could affect the office rental segment.
In the case of Textiles, cotton prices showing high volatility, which cannot be fully absorbed in finished goods prices, immediately. Paper segment is also facing price fluctuations, interrupted availability of raw material and rising input costs, which all remain the major concerns of the paper industry. Dumping of low-priced board papers from China and Indonesia is also a cause of concern.
Sector: Commodities
Market Price: Rs. 1296.20 as on today
FV: Rs 10/-
Stock Name: Century Textiles & Industries Ltd
BSE Code: 500040, NSE Code: CENTURYTEX
Market Cap.: Rs 14575 Cr
Book Value: Rs. 337
Segment: Paper & Paper Products
Incorporation: 1897
Headquarters: Mumbai.
